question

The purchasing power parity for different countries is adjusted (up or down) depending upon whether the cost of living is lower or higher than in the United States.

answer

TRUE

question

Although countries such as China and India are currently relatively poor, their economies are already large in absolute terms and growing more rapidly than those of many advanced nations.

answer

TRUE

question

In Amartya Sen's view, development is solely an economic process, and not a political process.

answer

FALSE

question

The Gross national income (GNI) per capita comes much closer to Amartya Sen's conception of how development should be measured than narrow economic measures such as Human Development Index (HDI).

answer

FALSE

question

Economists who argue that innovation and entrepreneurial activity are the engines of long-run economic growth, define innovation broadly to include not just new products but also new processes, new organizations, new management practices, and new strategies.

answer

TRUE

question

If a country's economy is to sustain long-run economic growth, the business environment must be conducive to the consistent production of product and process innovations and to entrepreneurial activity.

answer

TRUE

question

Entrepreneurial individuals have fewer economic incentives to develop valuable new innovations in market economies than in planned economies.

answer

FALSE

question

Strong legal protection of property rights is a requirement for a business environment to be conducive to innovation, entrepreneurial activity, and hence economic growth.

answer

TRUE

question

The Peruvian development economist Hernando de Soto has argued that much of the developing world will fail to reap the benefits of capitalism until they relax the property rights offered by their legal systems.

answer

FALSE

question

Five of the fastest growing economies of the past 30 years—China, South Korea, Taiwan, Singapore, and Hong Kong—had one thing in common at the start of their economic growth: democratic governments.

answer

FALSE

question

Totalitarian states that limit human freedom are highly conducive to progress in terms of innovation, entrepreneurship, and economic growth.

answer

FALSE

question

A strong belief that economic progress leads to adoption of a totalitarian regime underlies the fairly permissive attitude that many Western governments have adopted toward human rights violations in China.

answer

FALSE

question

According to the influential economist Jeffrey Sachs, tropical regions have a more extensive division of labor than temperate regions.

answer

FALSE

question

During the late 1980s and early 1990s, totalitarian governments collapsed and were replaced by democratically elected governments.

answer

TRUE

question

According to Freedom House, all democracies are free countries in terms of political and civil liberties.

answer

FALSE

question

New information and communication technologies have increased a state's ability to control access to uncensored information.

answer

FALSE

question

Many totalitarian regimes failed to deliver economic progress to the vast bulk of their populations.

answer

TRUE

question

The late Influential political scientist Samuel Huntington predicted that the universalization of Western liberal democracy will be the final form of human government.

answer

FALSE

question

Author Francis Fukuyama envisioned a world split into different civilizations, each of which has its own value systems and ideology.

answer

FALSE

question

In Samuel Huntington's thesis, global terrorism is a product of the tension between civilizations and the clash of value systems and ideology.

answer

TRUE

question

When a nation shifts away from a market-based economy, the state-owned businesses are sold to private investors.

answer

FALSE

question

In general, command and mixed economies failed to deliver the kind of sustained economic performance that was achieved by countries adopting market-based systems.

answer

TRUE

question

Economic freedom does not necessarily equate with political freedom.

answer

TRUE

question

The shift toward deregulation has been easier for former command economies than for mixed economies.

answer

FALSE

question

In China, state-owned companies still dominate the banking, energy, telecom, health care, and technology sectors.

answer

TRUE

question

If newly privatized firms are protected from foreign competition by barriers to international trade and foreign direct investment, they continue to act like state monopolies.

answer

TRUE

question

A well-functioning market economy does not require laws to protect private property rights and mechanisms for contract enforcement.

answer

FALSE

question

Without a legal system that protects property rights, and without the machinery to enforce that system, the incentive to engage in economic activity can be reduced substantially by private and public entities.

answer

TRUE

question

In most eastern European nations, the title to urban and agricultural property is often uncertain because of incomplete and inaccurate records, multiple pledges on the same property, and unsettled claims resulting from demands for restitution from owners in the pre-Communist era.

answer

TRUE

question

Although free markets and democracy can still be found around the world, the tide has been running in favor of command economies and totalitarian dictatorships.

answer

FALSE

question

By identifying and investing early in a potential future economic star, international firms build brand loyalty and gain experience in that country's business practices.

answer

TRUE

question

A country's economic system and property rights regime do not influence the attractiveness of the country as a market or investment site.

answer

FALSE

question

In both China and India, the shift toward a command-based economic system has produced large gains despite weak property rights and endemic corruption.

answer

FALSE

question

It is more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses.

answer

TRUE

question

Social unrest and disorder are less likely to be found in countries that contain more than one ethnic nationality.

answer

FALSE

question

In the context of political economy, the past three decades have seen a general move toward:

answer

adoption of legal systems that better enforce property rights.

question

One common measure of economic development is a country's:

answer

gross national income.

question

_____ is regarded as a yardstick for the economic activity of a country; it measures the total annual income received by residents of a country.

answer

Gross national income

question

Which of the following statements is true about gross national income (GNI)?

answer

Economist Amartya Sen has argued that development should be assessed less by material output measures such as GNI per capita.

question

To account for differences in the _____, one can adjust GNI per capita by purchasing power.

answer

cost of living

question

Which of the following statements is true of purchasing power parity (PPP)?

answer

The PPP data gives a static picture of economic development.

question

In 2010, the PPP per capita of China was $7,640 and the PPP per capita of the United States was $47,360. This means that the:

answer

cost of living was lower in China.

question

As a result of _____, large amounts of economic activity in India are unrecorded and the official GDP figures of the country fail to tell the entire story of the economy.

answer

active bartering

question

Black economy is most likely to be prevalent when:

answer

people engage in barter agreements to avoid paying taxes.

question

The _____ is based on three measures: life expectancy at birth, educational attainment, and average incomes based on PPP estimates.

answer

Human Development Index

question

The Human Development Index comes close to Amartya Sen's conception of how development should be measured although _____, suggested by Sen in his thesis, is not included in the index.

answer

political freedom

question

Which of the following is an indicator of low human development in a country?

answer

A score of 0.3 on the HDI scale

question

_____ is broadly defined as the development of new products, processes, organizations, management practices, and strategies.

answer

Innovation

question

_____ first commercialize innovative new products and processes, and help provide much of the dynamism in an economy.

answer

Entrepreneurs

question

Which of the following best exemplifies an entrepreneur?

answer

Javier purchased an invention of his friend to start a company that processes plastic bags into synthetic cloth.

question

Which of the following statements is true about innovations and entrepreneurship?

answer

Innovations in production and business processes lead to an increase in the productivity of labor and capital.

question

Which of the following creates an unfavorable environment for innovations and entrepreneurship?

answer

State monopoly in production

question

Which of the following creates an environment that is conducive to product and process innovations and to entrepreneurial activity?

answer

Privatization

question

Due to strong legal protection of property rights, businesses and individuals will:

answer

invest more in innovations.

question

People in the West tend to associate a(n) _____ with a free market system, strong property rights protection, and economic progress.

answer

representative democracy

question

Only a totalitarian regime that is committed to _____ is capable of promoting economic growth.

answer

a market system and strong protection of property rights

question

The influential Peruvian development economist Hernando de Soto has argued that much of the developing world will fail to reap the benefits of capitalism:

answer

until property rights are better defined and protected.

question

_____ is most likely to be the consequence of economic progress.

answer

Adoption of democracy

question

The belief that geography can influence economic policy, and hence economic growth rates, goes back to:

answer

Adam Smith.

question

The influential economist Jeffrey Sachs argues that throughout history, _____ , with their long engagements in international trade, have been the most supportive of market institutions.

answer

coastal states

question

The work by Jeffrey Sachs suggests that investments in _____ help explain why some countries in Southeast Asia have been able to overcome the disadvantages associated with their tropical geography and grow far more rapidly than tropical nations in Africa and Latin America.

answer

education

question

In the context of political economy, one notable development of the past 20 years has been the spread of:

answer

democracy

question

During the late 1980s and early 1990s, many of the world's nation-states moved away from:

answer

totalitarian governments.

question

In the context of the changing political economy since the late 1980s, which of the following statements is true?

answer

Most of the world's nation-states are providing greater political and civil liberties to their citizens.

question

"Not all democracies are free, as some still restrict certain political and civil liberties." Which of the following countries best fits this argument?

answer

Russia

question

The collapse of _____ in eastern Europe was precipitated by the growing gulf between the vibrant and wealthy economies of the West and the stagnant economies of the East.

answer

communism

question

How have new information and communication technologies, including the Internet, affected the political economy in general?

answer

They have reduced a state's ability to control access to uncensored information.

question

Economic advances in many countries have led to the:

answer

emergence of increasingly prosperous middle and working classes.

question

According to the author Francis Fukuyama, the world is most likely witnessing the end of:

answer

mankind's ideological evolution.

question

According to _____, the collapse of communism will result in the new world order that will dominated by a universal civilization characterized by democratic regimes and free market capitalism.

answer

Francis Fukuyama

question

Which of the following statements is true about the late influential political scientist Samuel Huntington's vision of the new world?

answer

Samuel Huntington theorized that modernization in non-Western societies can result in a retreat toward the traditional.

question

In Samuel Huntington's thesis, global terrorism is a product of the:

answer

clash of value systems and ideology between civilizations.

question

Which of the following is most likely to prove detrimental to democracy and international business?

answer

Emergence of different civilizations, each of which has its own value systems and ideology

question

In the context of global economy, which of the following has been widely accepted since the late 1980s?

answer

Deregulation of economies to promote greater competition

question

Which of the following statements is true about the changing economic system since the 1980s?

answer

There has been a shift away from a mixed economy.

question

The government of Great Lanthania is planning to adopt a market-based economic system. To be able to do so, the government of this country should:

answer

adopt privatization.

question

Which of the following is most likely to be implemented by a country as a part of deregulation?

answer

Removal of price controls

question

The United Nation of Zorwaya has strict restrictions on direct investment by foreign enterprises, and it opposes the establishment and operation of private enterprises. The highest authority in the country enforces tight control over prices and production output. According to this information, the United Nation of Zorwaya most likely opposes _____.

answer

deregulation

question

Which of the following is most likely to indicate that the nation of Erbia has adopted deregulation?

answer

The retail sector in Erbia has been opened for foreign direct investment.

question

Which of the following steps is most likely to be involved in the deregulation of an economy?

answer

Privatizing the state-owned enterprises

question

Which of the following best supports the economic transformation from a centrally planned command economy to a market-based economy?

answer

Transferring the ownership of state property into the hands of private individuals

question

The _____ movement started in Great Britain in the early 1980s when then Prime Minister Margaret Thatcher started to sell state-owned assets such as the British telephone company.

answer

privatization

question

How does privatization help stimulate gains in economic efficiency?

answer

It provides incentives to new private owners to search for increases in productivity and to enter new markets.

question

Which of the following is most likely to guarantee the success of privatization?

answer

Deregulating and opening of the economy

question

The government of Greenland Republic protects its newly privatized firms from foreign competition by imposing stringent barriers to international trade and foreign direct investment. As a result of this, the newly privatized firms will:

answer

continue acting like state monopolies.

question

Which of the following statements is true about privatization?

answer

When newly privatized firms are extensively protected from foreign competition, they have little incentive to restructure their operations to become more efficient.

question

In the Republic of Lantharia, the state-owned telephone company enjoys a monopoly. The government of Lantharia Republic wants to maximize the operating efficiency this company by privatizing it. Which of the following is most likely to help the government in being successful in this endeavor?

answer

Spliting the company into independent units to compete with each other

question

A well-functioning market economy is most likely to lack:

answer

state intervention in pricing and production.

question

The absence of a legal system that protects property rights and the lack of machinery to enforce that system in a market economy usually results in:

answer

the lack of incentives to engage in economic activity.

question

Which of the following is an implication of the global changes in political and economic systems for international business?

answer

The ideological conflict between collectivism and individualism is less in evidence today.

question

Which of the following is most likely to be an implication of the global financial crisis of 2008-2009, and the recession that followed?

answer

Retrenchment from free markets and democracy

question

Many commentators have blamed the problems that led to global financial crisis of 2008-2009, and the recession that followed on:

answer

a lack of regulation.

question

Which of the following statements is true about the global changes in political and economic systems?

answer

Many of the undeveloped and impoverished national markets of eastern Europe, Latin America, Africa, and Asia are potentially enormous for international business.

question

The _____ of the Cold War era has vanished.

answer

bipolar world

question

The United Nation of Amberia, a Western European country, fought on the winning side of the Cold War. Which of the following was most likely being propagated by the country by participating in the Cold War?

answer

Free markets

question

Countries with _____ are more likely to attain high and sustained economic growth rates and are thus a more attractive location for international business.

answer

democratic regimes

question

Although China and India are very large markets when measured by number of consumers, their _____ makes them a relatively small market when measured in economic terms.

answer

limited purchasing power

question

_____ are primarily the advantages that accrue to early entrants into a market.

answer

First-mover advantages

question

In economic terms, the long-run monetary benefits of doing business in a country are most likely to be a function of the:

answer

present wealth (purchasing power) of consumers of the country.

question

Capricorn Creative Inc., a U.S. based advertising firm, was the first in the advertising industry to identify the growth potential of Brazil and to make huge investments in it's economy. As a result, the firm was able to build brand loyalty and gain experience in that country's business practices. In the language of business strategy, Capricorn Creative has typically benefited from:

answer

a first-mover advantage.

question

Which of the following best exemplifies a first-mover advantage?

answer

Venus Inc. has more than 50 percent market share in the telecom industry, because no other company had invested in this industry before Venus Inc.

question

Handicaps experienced by an organization because of entering into a market after several other companies who have already established their brands in the market, are referred to as _____.

answer

late-mover disadvantages.

question

Which of the following is most likely to be an advantage that first-movers tend to have relative to last-movers?

answer

Greater brand loyalty

question

When Galaxy Ventures, a real estate company, entered the low cost housing business, the market was already saturated with other players. Thus, the company was forced to exit the market due to lack of customer loyalty and substantial dividends. Which of the following is a term used to described the situation faced by the company?

answer

Last-mover disadvantages

question

Both China and India have achieved high growth rates despite relatively weak property rights regimes and high levels of corruption, because of:

answer

the shift toward a market-based economic system.

question

Which of the following statements is most likely to be true about the economic prospects of a country?

answer

The economic system and property rights regime are reasonably good predictors of economic prospects of a country.

question

The cost of doing business is most likely to be the lowest in:

answer

open democratic societies.

question

Star Volans Inc. is planning on expanding its business globally. In terms of the costs involved in conducting business in a country, it will be most economical for the company if it chooses a country:

answer

where politicians are held accountable by the electorate.

question

In the context of cost, which of the following can be considered as the most attractive market or investment site?

answer

A country that has a well-developed body of business contract law

question

A company has business interests in a country where the President-elect wants the country to adopt socialism and protectionism. Consequently, the company will be concerned about the _____ risks of continuing to do business in that country.

answer

political

question

When social unrest and disorder in a country causes drastic changes in its business environment that adversely affect the profit and other goals of a business enterprise, the business enterprise is said to be facing a(n) _____ risk.

answer

political

question

Which of the following factors in a country is most likely to cause a political risk for an international business?

answer

The presence of more than one ethnic nationality

question

Lamboria Republic is facing a high rate of inflation, and the government debt in the country is also high. As a result, the country's business environment is beginning to deteriorate, and the profits of the business enterprises are hurt. According to this information, Lamboria Republic is facing a(n) _____ risk.

answer

economic

question

Which of the following statements is most likely to be true about the risks of doing business in a country?

answer

One visible indicator of economic risk is the level of business and government debt in the country.

question

The government of Ugania had been extending huge amounts of loans to the business enterprises in the country. However, the borrowers failed to generate the profits necessary to repay their debts. As a result, national banks in Ugania had a lot of nonperforming assets on their books, and the Uganian currency was devalued. In this context, the business enterprises in Ugania are most likely to face a(n) _____ risk.

answer

economic

question

A(n) _____ risk can be defined as the likelihood that a trading partner will opportunistically break a contract or expropriate property rights.

answer

legal

question

If a company from a highly developed nation hesitates to enter into a joint venture with a company from a developing nation due to inadequate protection of intellectual property rights, it is trying to avoid a(n) ____ risk.

answer

legal

question

The risks of doing business are most likely to be the highest in a country that:

answer

faces frequent changes in government and government policy.

question

Generally, the costs and risks associated with doing business in a foreign country are typically lower in:

answer

economically advanced countries.

question

Which of the following is most likely to be true about the overall attractiveness of a country as a potential market or investment site for an international business?

answer

The costs and risks associated with doing business in a foreign country tend to be greater in politically unstable nations.

question

The government of Nerumbia wants to open the country's economy to international business, and increase its overall attractiveness as a potential market or investment site. Which of the following will facilitate this decision of the Nerumbian government?

answer

Investing in infrastructure and in the required supporting businesses

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